Buying a House That Needs Work: What You Should Know Before You Buy
Before you decide that buying a house that needs work is the right move for you, check out this quick guide to making that kind of investment.
Are you in the market for your dream home? While buying a home that’s ready to live in may seem like the easiest option, there are a lot of benefits to buying a fixer-upper.
For one, they sell for far less than a home that’s move-in ready. And you can use all the money you’ll save to transform it into the perfect home for you and your family.
However, there are a few things to be on the lookout for when buying a house that needs work. If you’re not careful, you could end up with a huge money-pit.
Do you want to know more? Keep reading to learn our tips for buying a fixer-upper.
Decide If It’s Worth It
Nobody wants to invest all their time and money into a home that won’t be worth it in the long run. So, before you put an offer in, calculate if the home is a good financial decision.
This can be hard since the cost of renovations will vary drastically based on your personal style and the materials used. But try to estimate how much it’ll cost to fix the house up and then add the cost of the home to that number.
Look at what similar-sized, move-in ready homes in the neighborhood are selling for. Is that number still higher than your estimate? Then, purchasing this fixer-upper may be worth it in the long run.
Look for Outdated Homes
The term fixer-upper can and has been used very broadly. Anything from a home with old appliances and flooring to a dilapidated house can be called a fixer-upper.
The best route to take is to shop for outdated homes. These are usually structurally sound but simply haven’t been updated in several years. The owners of these homes likely don’t have the time or money to put into renovations, so it sells for far below the market price.
Of course, cosmetic damages and issues are the easiest to fix, and these types of homes can give you a great return on investment.
Avoid Homes with Major Damage
If you notice a home is on the market for an unusually cheap price, take a moment to ask yourself why instead of jumping to put an offer in. There’s a good chance it has serious problems, like structural damage, foundation issues, mold, plumbing problems, or a leaking roof.
All of the above are examples of problems that are likely not worth it to fix. These can come with all sorts of hidden costs, and you’ll probably find yourself with a money-pit that may even have you declaring bankruptcy.
Did you fall somewhere in between? Maybe your home needs more than new appliances but doesn’t have any major damage.
One of the best ways to update your home and increase its value is to think of creative solutions to solve your problems.
Does your roof have a few lose shingles? Take them out and install a sunroof. Is there water damage on your living room wall? Cut it out and install a large bay window.
Fixing a water-damaged wall can come with a big price tag. So while adding a bay window may cost more upfront, it could end up being the best option by increasing the value of your home. If you’re not sure how to handle water damage in your home, check out this blog.
Make Sure the Layout Is Good
Does your potential new home have enough bedrooms? Are the kitchen and living room a good size? Do you like the overall layout?
If you answered “no” to any of the three questions above, it may not be the best house to purchase. Adding rooms and changing the layout are expensive renovations, and they likely won’t add much value to your home. The only exception to this rule is adding a second bathroom
Hire an Independent Inspector
It’s no secret that getting your home inspected before you buy it is an important step. However, this is crucial with older fixer-uppers. The last thing you want is for your inspector to miss something that ends up costing you a ton to fix.
It’s best to hire an independent inspector. Avoid using one your real estate agent recommends. While they probably are a reputable inspector, you don’t want to risk them downplaying the severity of damages because they work closely with your real estate agent.
Get Your Financing in Order
Once you’ve purchased your home, you’ll have to spend a good deal of money fixing it up. If you’re like most people, you probably don’t have tens of thousands of dollars laying around for renovations, especially after just buying a home.
This is where loans and financing options come into play. A 203k loan is a great option because it conveniently gets rolled right into your mortgage. However, there are several different options you could choose from, so be sure to do your research.
Get to Work
Labor costs will make up a huge part of your renovation bills. You can cut this cost substantially by doing some of the work yourself.
Of course, you should leave anything technical or difficult for the professionals. Installing tiles, doing electrical work, and the like can be expensive if you botch your DIY attempts.
However, things like painting and ripping up old carpet can easily be done yourself.
Buying a House that Needs Work
If you’re in the market for a new home, you may be considering buying a fixer-upper. Just be sure you read our tips for buying a house that needs work to ensure you get the best home possible.
Are you unsure if a fixer-upper is the best choice for you? Check out our article on buying a near-perfect home to compare your options.